Friday, May 25, 2012
Posted by D. Daniel Sokol
Angela Huyue Zhang University of Chicago - Law School asks The Single Entity Theory: An Antitrust Time-Bomb for Chinese State-Owned Enterprises?
ABSTRACT: In five recent cases involving the acquisitions of European companies by Chinese state-owned enterprises, the European Commission has delved deeply into the relationship between Chinese state-owned enterprises and the wider Chinese State. A common issue in these cases was: did the notifying state-owned enterprise operate independently of the Chinese State or was there scope for the Chinese State to coordinate the behaviour of the notifying enterprise and other state-owned enterprises in the same sector and should they therefore be treated as part of a single entity for the purpose of merger analysis?
To provide an in-depth analysis of this issue, this article first reviews the historical development of the reform of state-owned enterprises and examines their current corporate governance structure. By applying the economic theory of the firm to understanding the concept of undertaking under the EU Merger Regulation, this article reveals the flaws in the European Commission's analysis of this issue. As the single entity theory can be used as both a shield and a sword, the European Commission’s decision on this issue will have far reaching implications for future antitrust cases involving Chinese state-owned enterprises.